Blog Post

Retail investors told to be on guard against buzzwords and dubious marketing claims.

- Reclaws International (reclaws.com)
Aug 25

China warns public over ‘Blockchain’ Ponzi schemes.


 
China's government has warned of “criminals” attracting retail investors into Ponzi schemes using buzzwords such as “blockchain” and “virtual currency”, as official concerns over risk trump support for financial innovation. 
"Many investment schemes are not really based on blockchain technology but are hyping the blockchain concept to raise funds illegally”, the People’s Bank of China, the China Banking and Insurance Regulatory Commission, the Public Security Bureau and two other agencies said in a joint statement on Friday. 
The agencies did not announce specific policy actions but warned the public to be on guard against “fraud” and report suspicious activities to authorities.
Marketing claims such as “value will only rise, never fall” and “high return, low risk” are characteristic of fraud, the statement claimed. 
The warning was issued as Chinese regulators escalated their crackdown on cryptocurrency trading and initial coin offerings. 
 
A multi-agency task force on internet finance will take measures against 124 cryptocurrency and ICO platforms with servers located outside China but which substantially target Chinese residents, the official Shanghai Securities News reported this week. The report did not specify how authorities would act against foreign groups. 
Internet group Tencent also shut down at least four major public accounts related to cryptocurrencies on its popular WeChat mobile messaging platform.
The company said in an emailed statement that the accounts violated instant messaging regulations that the Cyberspace Administration of China issued in 2014. 
ICOs enjoyed a brief but intense boom in China in mid-2017, but in September the government declared them illegal and shut down platforms that facilitated such deals. 
 
Days later, a multi-agency task force on internet finance shut down exchanges for trading bitcoin and other cryptocurrencies. Before the shutdown, local exchanges had been permitted to continue operating after an earlier campaign forced them to strengthen controls against money laundering and capital flight. 
Even after local platforms exited, however, trading and ICO investment continued under the radar, with investors using WeChat or other messaging tools to facilitate informal transactions.
Chinese investors were also able to access foreign-based platforms, sometimes using a virtual private network to evade China’s internet controls. 
In addition to targeting overseas platform, the task force is also forcing third-party payments groups to strengthen measures to ensure that they do not process payments for cryptocurrency trading and ICOs. 
Also last week, a district government in Beijing issued a notice banning office buildings, hotels and shopping malls from hosting sales and marketing events related to cryptocurrencies. 
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